A Brexit thought experiment

While many had hoped that the sorry scenes of a few days ago were relics of the distant past, the ugly images that flickered across screens worldwide were a reminder that you can never be too vigilant in trying to spot and neutralize troublemakers.

But enough about the worst day for the SPX in nearly a month.

While it would be nice to think that another mass shooting in the United States might finally catalyze some common sense thinking on how to address the fetishization of violence in some quarters of American society, the reality is that if the murder of 20 small schoolchildren at Sandy Hook didn't do the trick, then nothing probably will.

Meanwhile, the ugly scenes at the Euros, notably involving England and Russia fans, open up the opportunity for an interesting thought experiment. If both sets of fans were to be involved in further violent episodes (which hardly stretches credulity, does it?) and if each term were summarily expelled from the tournament per UEFA's weekend dictum, what would that do for the Brexit vote?

The knee-jerk reaction would likely be a lurch towards "Leave"; after all, if they don't want us, we'll take our toys and go home, innit. Of course, UEFA has nothing to do with the European Union, as the presence of England's antagonists as well as countries like Switzerland and Turkey can attest.

Moreover, the cost of a "Leave" vote may actually be higher in a post-Euros expulsion world. Will EU countries really give travel visas to UK residents carte blanche when they've caused this type of trouble over the years? Obviously the vast, vast majority of travelers are perfectly innocuous...but the same holds true of airline passengers and we still have to waste time queuing in airport security lines.

Perhaps they will, but it doesn't exactly fit the narrative peddled in some quarters that "we'll have all of our privileges but not of our obligations" by Brexiting. Privileges, after all, have to be earned...and having a punch-up on somebody else's front step isn't exactly the best way of going about doing so.

Stay tuned later this week for an analysis of what's currently priced into the market for the referendum.

Elsewhere, the price action in precious metals have been stunning if somewhat unsurprising given the vehemence of the fixed income rally. When Macro Man looked at silver a month ago, he noted that it was perilously close to breaking a little H&S pattern than would target below $16 oz. A week later, the neckline duly broke.

Rarely will you see a pattern fill its price objective so neatly as silver did, which reached the level nearly to the penny and has sine bounced with renewed vigor.

While the dollar's fortunes are looking slightly more mixed these days (weaken against the yen, a little stronger against the commodity complex?) the ongoing collapse in global "risk free" real rates of return is a power argument in favor of the metals complex.

It seems nonsensical that Bunds could trade at a negative yield, but here we are just a tap-in away. While it does look tempting to pile onto the metals steam train, Macro Man just cannot convince himself to do so quite yet. GDX for, example, as put in a couple of notable gaps recently that are just begging to be closed.

If the Fed ever came out and grabbed the monetary steering wheel rather than filing meekly to the back of the bus, perhaps those gaps would close in a hurry.

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Brits cannot function without alcohol. They simply can't. They are a disgrace. Yes you could argue that neither can Russians but Russians do not exactly live in Disneyland.

Spent 5 years on the floor in London. Monday-Wednesday conversation of the clerks and lads and 'ladettes' was debriefing the last week end binge drinking. How much they got sick, the strangers they fucked in the toilets (the girls talking). Thursday-Friday conversation was all about psyching up for the next binge week end

it is a culture of singleness misery. And that female journalist who went to investigate those famous Cardiff nights (ok it's Wales but whatever) was horrified when she realised those girls were not the clerks and low income type she suspected, but lawyers, doctors, dentists etc

a culture of sexual frustration and misery. And consequently the number one market in the world for dildos. I hope Marseille will make enough money from the tournament to pay for all the cleaning and repairs.

This weekend a female scubadiver died in our arms in Greece. We tried to resuscitate her for half an hour. The ambulance came so late and poorly equiped. The helicopter those laid back Greeks were referring to never came. Because it's austerity and they cannot maintain all helicopters. The level of incompetence and relaxation among Greeks around was just unbearable. It's hard to love Greeks after such event but i still love them.

So is the irony of the week end. On one hand you have a woman who died from a diving accident because emergency rescue failed. On the other hand you have 30 or so assholes in Marseille with self inflicted wounds that receive the best treatment from one of the best medical countries in the world. The guys who just beat up each other just for fun and out of boredom should be let bleed a little while longer.

Metals with Brexit on their mind probably move incremently into the coil position from here. Less probably they head to the range top for a breakout. Last of all they breakdown with gross profit taking. Did I leave anything out ? Just make upyour own Brexit vote result to suit.

"a culture of sexual frustration and misery"I think you miss the point ,stick to shorting European risk. Frustration comes from locking in one's emotions/behaviour. If the Brits fuck their brains out in toilets they may well be the sluts in suits ,but I can assure you they will not be frustrated. It's a shame to see that even one so intelligent has you can't avoid mindless stereotyping built upon parochial experience. Rest assured out and about in the other 90% of the UK you'll find people who are to all intents and purposes has normal and fallible has any in Europe albeit alcohol remains too much of a problem here . Nonetheless if you want to see the other side of that problem where booze is not taken much of the time then head up into the wilds of Scandanavia . Bit of an eye opener to see what some Finns can do on the Summer solstice when their 'hair' comes down. Unfortunately, without the 'crutch' of booze they also have a tendency to exit life altogether a bit more frequently than most.In the US they tend to prefer drugs has their crutch of choice. In the Mid East it's religion. The fact remains that worldwide we have large groups of society who just can't get along without a crutch and the latter is often very destructive. Bad has a few football hooligans in Marseilles might be they are a long way from the mass murderers we see too often elsewhere.

nothing parocchial here checkmate (are you Brit, seems like i struck a cord) before i met my wife i had 15 years of sexual debauchery of the sickest kind, single, and the best 5 were in London, i guarantee you that. London is the city of vice.

drunk sex in toilets or a dark corner in the street, even if you thought it is cool in a movie, even if it makes for a funky story for your friends is miserable and YES it makes one frustrated. Trust me. Most of single Brits cannot envisage sex without heavily boozing and deep down they know something is wrong.

if you think 90% of the Brits booze normally you are completely out of your mind. Take any BA flight to anywhere and monitor the consumption in flight. Any Brit will order three times what the other traveller gets if any. Business or Economy, same same.

i did not mean to start a thesis on Northern European psychology and sexology, I do not give rat ass about the Finns who are Europeans champions of bore.

my point was on violence only - this is where the culture of misery emerges - you have never seen other European nations going the way of the hooligan

even the US that you mentioned, gun crazy and built on violence ( i have read all of Vollmann's works and believe me that's plenty) even those guys will never lose it in or outside stadium and to boot, if you consider THEIR football you'd think the violence of the game would make the NFL fans real beasts in the streets. the NFL makes the UEFA look like pussy play.

thus there is a problem with European soccer only. Rugby fans and British rugby fans behave superbly.

so the problem is Brits AND football. No generalisation here. British football fans are a disgrace.

Nico, Reread my post. I said go to the other "90%" and you will find people not much different to anywhere else in Europe. London my friend is not the UK it just to oftenfeatured has though it is. I also said that even in the 'other' UK alcohol is too much in evidence for comfort. So, really what I am saying is your experience on which to make judgements about the UK population in general is too narrow to be accurate considering your closing remarks on same. This is simply reinforced by "my point was on violence only - this is where the culture of misery emerges - you have never seen other European nations going the way of the hooligan". Now you may not know this ,but most of the UK don't actually go to football matches at all. You're describing your experience of sub sets of the population.I dare say you want to trolling around certain areas of say Paris I am sure you will find plenty of violence and criminality. I did :)I find no issue with your final remark except I would again say you describe only a sub set of the many people in this country who are football fans. Most don't behave like this group of so called English football supporters. One rotten apple does not condemn the entire barrel whom you have never met.I am not responding because you have 'struck a chord' at all. I am simply correcting your erroneous ideas mentioned earlier regarding the UK and it's "culture of misery" . You probably need to travel this country a lot more to get a better idea of general behaviour.

Brexit Schmexit, it does seem a bit overdone. The Brits have a tendency to obsess too much a ado about nothing. I mean, even if they vote to Brexit, it is not like David Cameron declares war on Germany or something. It would be all contained.

Something that does have a potential for a real negative spiral is the Chinese and Trump. Going back to MM's article from yesterday, it does seem the Chinese have lost the spine to support the Yuan. With Trump threatening to slap on tariffs on Chinese goods, and gaining the republican nomination recently, I wonder if the Chinese are thinking they need to preserve reserves even more than before. It probably gives them even less motivation to defend the Yuan. So when it does depreciate further and this causes any difficulties, Trump can rant on more about Chinese manipulation and why tarriffs are needed. This is potentially a self-reinforcing problem the closer one gets to the election.

Cashed in most of the gold position today. It has done well but unless there is further dollar weakness, I wonder if there is enough impetus to drive it above 1300. Strong retail sales this week or fed guidance would be a serious headwind. I also wonder if a bond correction is overdue and this would also take away a tailwind in terms of funds seeking gold as an alternative to negative yielding bonds. The bond move looks overdone unless the consensus is that the U.S economy is almost in a recession (which I actually think is the case), but I don't think that is the consensus at all.

disregard my rant - after seeing a person dying because of a lack of medical assistance at one corner of Europe, i just found 'unnecessary/uncalled for' violence that same weekend an absurd waste of medical and enforcement ressources even if France has plenty.

back to markets it is tempting to see a reversal Tuesday in that chaotic expiry week so 170/370 of my ginormous position was covered this morning. On a longer timeframe the damage on European charts is really ugly.

LOL. Nico's description of the "culture of misery" might be accurate in one small corner of UK life, i.e. The Square Mile. I am sure a few UK residents and natives recognized some reality in that description, but it's not really a general feature.

LB has some decisions to make this week, as we approach options expiration, yet with Dame Janet perched decorously in the middle of the weekly calendar (OK, try to erase that thought). For now the precarious state of USDJPY, teetering on support has him watching and waiting. A break below USDJPY 105 would bring 100 into play as a target and all that implies regarding equities. An über-dovish Yellen might be the trigger for such a move, so expect some firmness from La Paloma Blanca?

Be interested in punter's views on why CAD isn't following crude lower, or is it just a case of it will eventually - when it has to - and when it does it will drop in a big lumpy way overnight? Crude seems vulnerable now that US rig counts have risen and global demand seems weak at best, with China IP only growing at (cough) 10%.

There must be a machine somewhere for making up the Chinese data, IP, GDP and so on are not in any way plausible. As we have pointed out before, the lack of noise in their data is truly remarkable. Larger sample size might be part of the story of the vanishing standard deviation, but we all know that's not the real reason.

After this cool reflection on the capital markets let's get back to deconstructing the w/e of footy and shagging in toilets. Not sure if that is a "culture of misery" or just extended adolescence among a group of swots that studied a lot in skule and then went on to discover drinking and debauchery at Britain's lesser known institutions of higher education before their City jobs.

Tempting though it is to get down into the gutter and throw some national stereotypes back at one or two of the more emotional comments made this morning, I'll venture instead into territory never before entered in years (seems like decades) of admiring MM's reasoned analysis. Yes, this is the moment I have to ask whether something has been legalised in Connecticut without me knowing about it, and MM has begun partaking a tad too freely. I mean.....

2wk implied vols on cable now near 40%, HV 11%ish and rising,...still a good enough margin of error for me. I don't understand the lack of interest. Even if we have fireworks i can't see cable dropping 9 big figures in the space of a few weeks.

@Left - re: CAD I think its just a relative std dev issue - crude hasn't really come off that much, in fact one could argue as long as its between 47-52 its basically continuing to be 'at the highs', so I am not that surprised - I think if we break the range up (which booger expects) or down (like you expect) we should see a commensurate move in CAD.

I don't have much to contribute to the 'culture of misery' conversation, except from my times in London I just thought they were having a jolly good time and had their own twist on it like everyone else - I suppose its like the debt and deleveraging conversation - a healthy dose of stimulus to one person is generational theft for another. It did strike me as odd that a buttoned down culture of yore would prefer its delivery mechanism for alcohol to be the most effervescent one possible.

Out of -GBPCHF late Friday. We'll see about the timing of that. There has been a shift towards status quo in the final two weeks of constitutional referendums, or so I understand. I don't want to take a punt on the eventual outcome either (I still expect Remain, but odds implied in spot FX market, at least, aren't compelling enough for me). Also taken off gold, which worked awfully fast. Have a Fed meeting, retail sales, etc., which could challenge the story there.

no stress in commodity space yet. Will take some time to see china turns and accelerates the falling speed again. Brexit dominates mkt sentiment, and Fed on hold fearing everything - makes sense to me CAD and AUD stable lately.

Fintech experiment you ask?..well, if I too invented an app back in the for the NYSE I too may getaway with pillaging what honour the plebs have left in their villages..but no, that is not the case, your case with my writing is your problem not mine, and don't make it mine.

@anon. Well if significant swathes of American society didn't worship at the altar of the NRA, perhaps the shooters couldn't access guns for 5.99 plus two box tops from lucky charms. Don't recall the newtown guy or the sc guy or the va tech guy or the columbine guys being Islamists, funny enough.

With respect, gun laws in Europe have effectively allowed ISIS or other Islamic radicals access to a weaponless population. It may be that Islam and democracy are like oil and water, and incompatible. I don't worship the NRA, but I do see where governments as in Germany can overwhelm a weaponless population of say, Jews, and create an extremely bad outcome. I used to think that that was impossible in the USA, that that had to be a hangover from the old Prussian empire type of thinking. I have changed my mind, and think that severe government oppression is possible anywhere. Stalin and the Russian people and mass starvation comes to mind also...anyway, I don't think availability of guns to this guy killed these people. I think his inability to assimilate into American life did...

@belektron that is correct - more specifically, this is the smallest beta of spoos to vix since summer 2011 - for a move in vix from 13 to 19 spoos have barely budged from the highs.

@anon 5:26 the problem with your observation is not that its necessarily incorrect, but that any prescriptive solutions resulting from such a mindset could end up doing more collective harm than good. I prefer to think of it as a prisoners dilemma or pareto-optimal solution as opposed to an unwillingness to state the 'obvious'.

This market has been broken for months, liquidity might prove to be in very short supply when the façade finally cracks and punters realize that margin debt and buybacks is all that has been holding this thing aloft, and by "thing" I include all of the commodity complex and reflation trades as well as the thing we call "Spoos".

@washed is right, VIX is screaming higher in the absence of any major move in the cash market. For the time being....

Interesting day, Spoos sitting on support but not much of a late day bounce. We took some profits today in IWM, happy to reload again later in the week, but for now Dame Janet and Op Ex are both looming, so it's time to play a little smaller.

A Bucky bounce versus the yen seems imminent, and the data tomorrow might provide the narrative for such a move. A sharp and decisive break below 105 and all bets are off for this market. VIX above 20 today for the first time in three months.

what is the fundamental link between CNY and Euro banks?... Answers on a postcard then...

VIX flattening into expiry again, what a bitch. 21 feels high now but no inversion, big move along the curve. Huge run for shorts since mid-April but that's all been taken back or worse now. I said it looks bad.

PS if the Chinese money ball seriously moves to bitcoin - 10 bill market cap - it could do a lot of damage.

Lot of hubris going around. Glad not to be a tika-taka loving Yank, a Limy footy hooligan, a vodka drinking Rusky, card carrying NRA supporter, Ms. Wannabe bitcoin punter, sexually frustrated zealot or worst of all riding first class on the Trump train. In reality the name calling is all just a distraction to keep us from acknowledging the ugly truths within ourselves.